Not Shocked Michigan Approved RTW
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
If you remember, it was pretty contentious when Indiana became a right-to-work state last year. Lawmakers were leaving the state to avoid voting on the issue. It got a little ugly.
Now Michigan has followed suit. Michigan Governor Rick Snyder even cited Indiana as one of the main reasons he decided to go along with right to work.
He said he was seeing all these jobs headed to Indiana and felt like Michigan was losing out.
Right-to-work laws don’t allow contracts between companies and unions that require all workers to pay the union for bargaining on their behalf. So workers can opt out of paying union dues and don’t have to be a member of the union when working in a union shop,
Actually, I’m pretty skeptical about all the claims made about right-to-work laws – on both sides of the argument.
I don’t think massive numbers of jobs will come to states that have right-to-work laws and I don’t think wages will be depressed in those states either.
That’s because there really aren’t that many workers affected. Michigan might be a good test for my theory, though, because it has way more than the average numbers of union workers.
The national average of union workers among all workers is 11.8 percent. It’s nearly 17 percent in Michigan. So if any state was going to see an effect one way or another, it would be Michigan.
Another interesting fact that I don’t see get a lot of attention is that the national percentage of union workers in the private sector is only 6.9 percent. Among public sector workers, 37 percent belong to a union.
And in Michigan, cops and firefighters were left out of the right-to-work law.
Some 6,000 police and 5,000 firefighter union members were exempted because of special collective bargaining rights in state law and the state constitution, lawmakers said.
And that seems weird to me because – in my view – the public sector is where the trouble with collective bargaining mainly lives.
If you are a private sector employer and you get yourself contractually obligated to pay pensions and benefits you can’t afford, you go bankrupt.
But if you’re a public sector employer and you offer up pensions and benefits you can’t afford, the taxpayers are on the hook.
And that’s precisely what’s happening all across this great land.
Recently, researchers from the Stetson School of Business at Mercer University, the Private Enterprise Research Center at Texas A&M and the National Center for Policy Analysis looked into this.
They found that because of high discount rates used by state and local government pension plans to report their liabilities, those liabilities are underestimated.
They analyzed 153 state and local pension plans and recalculated their liabilities using a lower discount rate.
The researchers found that unfunded pension liabilities are approximately $2.5 trillion, compared to the $493 billion the funds report.
Unfunded liabilities for health and other benefits are $558 billion, compared to the reported $537 billion.
So, total unfunded liabilities for all benefit plans are an estimated $3.1 trillion – nearly three times higher than the plans report.
Studies that adopted lower discount rates have found liabilities may actually be 75 percent to 86 percent higher than reported.
By any measure, these plans are woefully underfunded.
And in addition to pension benefits, the researchers note, “State and local governments often also provide other retirement benefits, especially post-retirement health care benefits. These nonpension post-employment benefits include such things as health insurance, dental and vision insurance, and prescription drug plans. Unlike pension plans, most of these nonpension benefit plans are completely unfunded. That is, assets are not being set aside to fund the obligations.”
One state, Rhode Island, was confronted with one of the worst-funded pension plans in the nation.
Lawmakers there moved to alleviate the problem. They passed legislation in November 2011 to move current public employees to what’s called a “hybrid” benefit play that supplements the traditional plan — at a reduced level of benefits and costs — with an individual account similar to private 401(k) plans.
Under the changes, according to analysis by the National Council of State Legislatures:
• The state retirement plans’ unfunded liabilities fall from $7.3 billion to $4.3 billion.
• The estimated state and local government contributions for FY 2013 fall almost 40 percent, from $689 million to $415 million.
• The costs of restructuring are shared by all: retired workers, current employees and new hires.
•All benefits earned in the past are protected.
This is good, right?
Nah, public employee unions filed a lawsuit in June, saying the state of has a legal and a moral obligation to the active and retired teacher, state and municipal workers.
The suit is still winding its way through the courts.
Bottom line in all this is that we taxpayers are the insurers of all this pension liability.
Sooner or later, these chickens are going to come home to roost.
It’s really nice that public employees have been able – by virtue of their unions and collective bargaining agreements – to get themselves some really nice benefits.
But the truth of the matter is that many of these benefits are unaffordable and unsustainable.
How intriguing that public employees – as in Michigan – are often exempted from right-to-work laws, which seemingly could help alleviate the unfunded pension liability problems faced by these states.
It will be interesting to see how this all plays out.
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If you remember, it was pretty contentious when Indiana became a right-to-work state last year. Lawmakers were leaving the state to avoid voting on the issue. It got a little ugly.
Now Michigan has followed suit. Michigan Governor Rick Snyder even cited Indiana as one of the main reasons he decided to go along with right to work.
He said he was seeing all these jobs headed to Indiana and felt like Michigan was losing out.
Right-to-work laws don’t allow contracts between companies and unions that require all workers to pay the union for bargaining on their behalf. So workers can opt out of paying union dues and don’t have to be a member of the union when working in a union shop,
Actually, I’m pretty skeptical about all the claims made about right-to-work laws – on both sides of the argument.
I don’t think massive numbers of jobs will come to states that have right-to-work laws and I don’t think wages will be depressed in those states either.
That’s because there really aren’t that many workers affected. Michigan might be a good test for my theory, though, because it has way more than the average numbers of union workers.
The national average of union workers among all workers is 11.8 percent. It’s nearly 17 percent in Michigan. So if any state was going to see an effect one way or another, it would be Michigan.
Another interesting fact that I don’t see get a lot of attention is that the national percentage of union workers in the private sector is only 6.9 percent. Among public sector workers, 37 percent belong to a union.
And in Michigan, cops and firefighters were left out of the right-to-work law.
Some 6,000 police and 5,000 firefighter union members were exempted because of special collective bargaining rights in state law and the state constitution, lawmakers said.
And that seems weird to me because – in my view – the public sector is where the trouble with collective bargaining mainly lives.
If you are a private sector employer and you get yourself contractually obligated to pay pensions and benefits you can’t afford, you go bankrupt.
But if you’re a public sector employer and you offer up pensions and benefits you can’t afford, the taxpayers are on the hook.
And that’s precisely what’s happening all across this great land.
Recently, researchers from the Stetson School of Business at Mercer University, the Private Enterprise Research Center at Texas A&M and the National Center for Policy Analysis looked into this.
They found that because of high discount rates used by state and local government pension plans to report their liabilities, those liabilities are underestimated.
They analyzed 153 state and local pension plans and recalculated their liabilities using a lower discount rate.
The researchers found that unfunded pension liabilities are approximately $2.5 trillion, compared to the $493 billion the funds report.
Unfunded liabilities for health and other benefits are $558 billion, compared to the reported $537 billion.
So, total unfunded liabilities for all benefit plans are an estimated $3.1 trillion – nearly three times higher than the plans report.
Studies that adopted lower discount rates have found liabilities may actually be 75 percent to 86 percent higher than reported.
By any measure, these plans are woefully underfunded.
And in addition to pension benefits, the researchers note, “State and local governments often also provide other retirement benefits, especially post-retirement health care benefits. These nonpension post-employment benefits include such things as health insurance, dental and vision insurance, and prescription drug plans. Unlike pension plans, most of these nonpension benefit plans are completely unfunded. That is, assets are not being set aside to fund the obligations.”
One state, Rhode Island, was confronted with one of the worst-funded pension plans in the nation.
Lawmakers there moved to alleviate the problem. They passed legislation in November 2011 to move current public employees to what’s called a “hybrid” benefit play that supplements the traditional plan — at a reduced level of benefits and costs — with an individual account similar to private 401(k) plans.
Under the changes, according to analysis by the National Council of State Legislatures:
• The state retirement plans’ unfunded liabilities fall from $7.3 billion to $4.3 billion.
• The estimated state and local government contributions for FY 2013 fall almost 40 percent, from $689 million to $415 million.
• The costs of restructuring are shared by all: retired workers, current employees and new hires.
•All benefits earned in the past are protected.
This is good, right?
Nah, public employee unions filed a lawsuit in June, saying the state of has a legal and a moral obligation to the active and retired teacher, state and municipal workers.
The suit is still winding its way through the courts.
Bottom line in all this is that we taxpayers are the insurers of all this pension liability.
Sooner or later, these chickens are going to come home to roost.
It’s really nice that public employees have been able – by virtue of their unions and collective bargaining agreements – to get themselves some really nice benefits.
But the truth of the matter is that many of these benefits are unaffordable and unsustainable.
How intriguing that public employees – as in Michigan – are often exempted from right-to-work laws, which seemingly could help alleviate the unfunded pension liability problems faced by these states.
It will be interesting to see how this all plays out.
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